W/Ds selling to end users
I’ve heard some recent concerns about W/Ds competing with the mobile jobbers by selling direct to end users online.
Is your business hurting from any activity like this?
Have you found this to be a regular thing, did you expect it would come, or are you surprised to hear your supplier might be competing directly with you while still selling to you?
Is this the future of tool selling? Are you planning any kind of web selling to add to your truck sales?
November 29th, 2007 at 9:27 pm
Yes, the tactics of ISN hurt me everyday. They are only concerned about their own bottom line and not the long term effect this will have on the mobile tool business. I have been forced to shift my business drastically. I don’t think it will ever kill the mobiles completely, but it will kill off all the independents. Their will always be that market to the tech that can only pay 20 or 30 dollars a week, and that’s where the flag carriers will succeed, to a point, but even they will be thinned out. I have no plans to try anything online, the reason techs buy online is because they want “cheap” and that’s the bottom line. They will shop around until they find the cheapest possible price and I can’t compete with a warehouse that buys millions of dollars of product annually. My plan is to invest in another business all together because this one has been ruined by the warehouses.
December 12th, 2007 at 4:19 pm
Are they warehouse distributors or are they internet sellers that are sold by the manufacturer at W/D pricing? The answer is both. The only solution is for the manufacturer to attempt to control their corporate greed. Small margins will also shorten the longevity of a product.
Signed: A W/D that does not sell direct to end-users
December 12th, 2007 at 4:32 pm
As a manufacturer that does not sell to internet sellers I can confidently state that we are deeply concerned about the trend of internet sellers without an investment in inventory, storefront, or vehicle undercutting the prices and efforts or either mobile or brick/mortor retailers. Remember that most manufacturers rely on a network of direct or independant representatives. These people also rely on sales for their livelyhood just like the rest of us. I do agree that all manufacturers must put steps in place to protect against profit errosion from all sellers who work on little or no margin without any inventory commitment.
January 9th, 2008 at 4:34 pm
ISN doesn’t sell directly to end users, do they?
January 23rd, 2008 at 3:44 pm
Internet selling overall only accounts for some 5% to 7% of total overall sales. In any case, manufacturers do it, and WD’s do it. With shrinking margins, it is a defensive tactic, in fact a survival tactic.
There is no way to regulate it because the web sites are set up under alias companies. Last I checked, this is a still a free country.
January 24th, 2008 at 8:04 am
Speaking as a US tool manufacturer; every party to the supply chain, not just the manufacturers, need to control their “corporate greed”. The profit percentages and discounts for this and that to get a tool into the parts store chains and tool truck franchises is mind boggling. Many times the manufacturer is one in this chain making the least margins and when a US tool manufacturer can no longer condede on pricing the supply chain looks to overseas manufacturing. Manufacturers are looking to any avenue they can to promote and supply their products to the consumer. If this means from a warehouse, a chain store, tool trucks, or on-line; it must be done in a fair and balanced manner in which all parties purchase and profit proportionally to their efforts to promote and secure the sale. The internet has changed many things and one of them is it has given us the ability to reserach and search out details regarding a product before we purchase, which has also created the “shopping cart”. Tool trucks offer value and services that can never be replaced by the internet and this value comes with a price.
February 7th, 2008 at 9:11 pm
Boy do I have thoughts about this one. With mobile’s being the number one buyers from WD’s I feel their web sales are akin to stabbing us in the backs. I put up the big bucks to stock the product, provide weekly service, offer payment terms and do my part to keep these WD’s in business. What do I get in return? Tooltopia.com (ISN), SJ Discount Tools (Weiss) selling to the end user for 10pts over my cost. Return policies that make me wait months, if not longer, for credits and cut price direct mailings or deals with auto parts stores on shop equipment that make me look like a crook.
That’s why I do not deal with any WD that sells direct. Then they flood the parts stores with fliers promoting product @ 25pts or less over cost which makes me and every mobile out there look like a crook for wanting to make an honest living. Therefor I buy direct from any manufacturer that will allow and also find alternative channels (direct distributors) for other product.
Internet sales may be a small portion of the overall picture but the problem is that the practice cheapens the value of every brand sold in the mobile market and squeezes our margins in some cases. Question: If the manufacturer sells widget A with a MSRP of $100 to an end user online for $50 why is he charging me, the hand that feeds him, $60 for the same widget? I am an iATN member and I keep abreast of the tool purchasing climate amongst the elite of the technical community. They buy online all the time and share the best price options with the other 50,000 members who bother to login and read.
Some manufacturers have MAP pricing policies which regulate how low resellers can advertise. I think that is a step in the right direction. Now, if they would not treat their largest sales channel like second class citizens they may enjoy better sales, better brand value and better brand recognition.
Technicians buy off the tool truck because:
A: They get service.
B: They know they are getting a quality product (because I have to answer to them week in and week out).
C: Convenience
D: Payment terms (service as well)
If I was allowed to offer them a fair price across the board which also allowed me to make a decent living then the end user would get the best of every aspect of the tool purchase. That is what drives me to buy direct and earn that business each and every time.
To the person who thinks flag trucks are the only ones to survive and that indy’s will be brushed aside, THINK AGAIN PAL. It’s going to be the other way around. Indy’s provide the same if not better service, a better price and a wider product offering to a larger segment of the market. You take your overpriced hardline and your 200-300 customers and struggle your way into oblivion. The flag companies are pricing themselves out of the business. Their attempt to stay competitive by outsourcing their products to Kabo, Astro, Sunex, JS Products and the like doesn’t cut it. They still overcharge for offshore product, don’t do a good job at quality control and I can undercut them all day long and make twice the margin. You’re a dinosaur heading for the next ice age. I have no race teams or corporate employees to pay. I will win every time selling an equal product at a fair price.
ISN and Weiss better wake up or become statistics. We independent mobiles are not the blind following the blind. We communicate with each other, share best practices, provide the best service in the industry (before and after the sale) and also share our views on which WD’s treat us fairly. We are the wave of the future and we can bite back if cornered.
Put that in your website and smoke it!
February 8th, 2008 at 7:38 pm
Don’t forget Snyder Tool selling on eBay as cbmtools. Check out the prices they’re selling at. This is easily verified by looking up user ID history on their feedback page.
February 10th, 2008 at 4:33 pm
Regardless if it is manufacturers, wholesale distributors, dealers or consumers. We are all hurt when associates make promises and do not keep them.
It all comes down to ethics. Everyone thinks they have them, just in varing degrees. How often do we hear “It is only a small percentage”, “Everybody else is doing it”, “It is a free country”, “Nothing is written in stone”.
Unfortunately pillars of their communities feel all in business, love and war is fair as long as they get theirs and go to religious services.
A long, long time ago, in a galaxy far, far away ……we could do business with a look in the eye and a handshake.
Along came telephones, credit cards, fax machines, computers, the internet, email, websites, caller ID and of course caller ID blocking. All of which allow people to conceal their identities and intentions.
We are already advising consumers that it is OK to purchase import product from people they don’t know as long as it has a American name attached to it.
“No need for them to even pay jobber price let alone list price”. “The other guy will provide the service and warranty”. “It’s so cheap just buy another one”.
It will just be a matter of time before the American name and the American is no longer required and we are all replaced by foreign interests.
The people in this industry and nation had better wake up to the practices that cheapen relationships and product value.
February 12th, 2008 at 10:00 pm
I have been in the mobile tool business for only a year, but have had prior experience as a distributor’s helper when I was in my teens. Back when ISN was all about helping the mobile distributors we would purchase twice as much from them as we did from our francise. Now it is almost not even worth having on the truck b/c if it does’nt say Matco Snapon or Mac on it, then they can get it from their buddy at autozone, pepboys, advance, or oreiles for my cost.
These part stores use the WD’s as an incentive for shops to by oil and autoparts from them. They dont care if they make any money off something they barely have to touch. Then the customers come to us mobile guys wanting the price in the big catalog, but on truck credit. Because of the hassle the WD’s give us on warranty and the fact that I am putting it on credit I charge 10% over list on those products. If they dont like it than they can pay me cash at that list price.
I went from buying $10,000 a month to around 2, because I only take special orders for WD product with money down. From now on I will only stock my franchise product, because I know it will always be there, and my customers know that someone will allways be there to warranty it, hassle free with no questions asked.
Independents are great people, but the main problem is that if the customer moves or dist goes out of business than who is there for warranty. I dont sell SK, and wont, but I am contantly trying to help out customers that have drawers full of brokens. Yes at the last shop they were at there was a great independent that was an awesome tool man, but now they have no one, but me. So now because the guy buys a lot of tools from me I have to go buy this crap just to warranty it, then months later I might recieve a credit. Oh yeah when the other customers happen to see the SK stuff hidden away on my truck their eyes light up as they belt out “oh you sell SK, well I got a bunch of brokens to take care of.”
The WD’s should take a hint from the Cornwell history books. Back a long time ago Cornwell was the first in mobile tool sales and had a booming business with many distributors. Then they decided to build a wholesale to the public in Atl Ga, selling tools at a 10 or 15% discount for cash. All of their great distributors said see ya, and Cornwell has never been the same since. I had never even herd of them untill I started up my franchise with another company.
February 14th, 2008 at 2:54 am
JonBW, that warranty issue works both ways you realize, I as an indy take Mac, snap-on, Matco and Corwall stuff in every day of the week because lots of my shops either don’t have one of those dealers or else he’s not a good tool man and doesn’t take care of the warranty. I replace it with SK and my customers appreciate my better service.
The issue we are talking about here is WD’s selling the exact same tools that they sell me to my customers for a reduced price through a website or catologs or whatever. They are biting the hand that feeds them. Then expecting me to do the warranty when I didn’t get the initial sale. I have to build the cost of warranty into each sale, a warehouse doesn’t. If I tell the customer “no take it back to where he bought it”, then I’m the bad guy and that customer may never buy another tool from me again. But these suspect warehouses don’t care because they got the sale and never have to deal with warranty or ever have to face these customers face-to-face. They sell the tools cheap because they know their is no risk involved going in. The warehouse owner got his new boat, the Indy dealer goes out of business, that’s reality.
It’s the same with the parts stores too, they deliver the tool with little or no overhead tied up in it, but look out when it’s broken because that customer is going to head for the nearest Indy tool truck and demand they take care of it.
I really believe the solution to this starts with the manufacturers. It would take a lot of courage for them to stop selling tools to these vigilanty warehouses, or at least charging them more for the product to force them to keep their prices up. Most of them have shareholders to answer to, so I don’t think it would ever happen. The internet has created a whole new way of business and these warehouses are taking full advantage. What they disregard is what else it has created, that is communication. So now as the Indy tool dealers join forces in the industry, we become a powerhouse bigger than even the biggest warehouse out there. We can choose to boycott the warehouses with questionable sales practices, how long do you think those warehouses are going to last then? All it would take is one warehouse closing and the message will be sent that we will not tolerate it anymore, the others would quickly fall in line for fear that they would be next.
Maybe the manufacturers could learn something from the Indys, start their own association for the sole purpose of protecting their product. Stand united against these warehouses and don’t let them “cheapen your product”. If they violate, give them the boot. These manufacturers need a full chain of healthy distribution. When one link of that chain gets skipped over, that being the mobile dealer, the whole chain is junk. The manufacturers have the power to control that, and if they stand as a united front, they can satisfy their shareholders and control the long term health of their products without being the bad guy”. I’m guessing the kind of leverage a group like that would have would also help keep the margins up when selling to the big four also. Thus making the manufacturers even stronger in the long term.
February 14th, 2008 at 3:05 am
One other thing, while most of the warehouses will deny this practice and claim they don’t sell to the end user directly. If they are selling directly to an online discounter like say…oh I don’t know, lets say tooltopia as an example…Then your just as guilty as if your selling direct. You can’t justify that no matter how you try, keep in mind, your in the Indys crosshairs, don’t forget that.
February 18th, 2008 at 12:33 pm
If tooltopia is ISN and ISN is Tooltopia, then why does Tooltopia carry vendors that ISN does not, over 80. Just sell tools, the business will get better, it always does…
February 20th, 2008 at 12:21 pm
Some good points being made here, but some of this is disturbing. I would respectfully point out that these very situations are also faced daily at the warehouse level. WD’s must also warranty items that they did not sell. It is a significant part of the cost of doing business for them.
Mobile Jobbers, and parts stores routinely buy from many different WD suppliers. When needing to return an item, or a defective, they frequently make the return to a different - usually more convenient - WD than the one from which the product was purchased.
Competition is very tight at the WD level as well. The WD is then forced into the same dilemma as you describe - make good on the warranty, or possibly lose some, or all of the Jobber’s business.
The result is that the smaller to mid-size WD’s are squeezed on both ends. They have to compete with larger warehouses that can buy better, while also taking care of the problematic issues, such as warranty, and in-depth customer service like product knowledge, special ordering parts and accessories and so forth. The latter of which is time consuming and thus labor sensitive. In other words - expensive.
We have drifted from the main subject, however all of this is interrelated. WD’s do indeed have overhead, and they also need to find ways to survive in this new business climate. Margins are compressing, and expenses are rising for them as well. The unfortunate by product is that you will begin to see fewer WD’s and that means that customer service will suffer greatly.
In the old days, especially before the internet, there were specific territories that WD’s served, very much like Jobbers have, and still do service. No longer. WD’s are under siege every day from national competition. They deserve some love here too.
There are other problems beside the internet. Big box chains, and membership clubs are also cutting in to WD, AND Jobber business.
The solution is not to point fingers at other levels of the supply channel, but to have respect for each other and work together to enhance the industry. WD’s want, and need for their Jobber customers to be successful. The reverse is also true.
In the end a free market largely takes care of it’s own problems. Companies at any level will not be around long if they can’t make a decent profit. I’m not sure that more regulation is needed, but I am sure that some good old fashioned common sense is a great foundation to rely on. Not every warranty needs to be given a blanket replacement, and not every discount price needs to be met to make a sale.
Thanks
February 20th, 2008 at 8:35 pm
DMax says:
“Mobile Jobbers, and parts stores routinely buy from many different WD suppliers. When needing to return an item, or a defective, they frequently make the return to a different - usually more convenient - WD than the one from which the product was purchased.”
Well welcome to the mobile tool industry. I deal with that day in and day out. But, unlike your assumption, I deal with a few suppliers as possible. I will only buy from 2 WD’s. Most from 1 and if they don’t have it I go to the other. It’s too much of a hassle foraging through invoices from multiple suppliers. I have to spend my time on the road combatting the discount sales tactics of the online (no service) sellers. I don’t have time to be calling 10 different WD’s pricing items.
I buy my hardline direct from the mfr and deal direct for warranty. Though I rarely have to warranty any of their product. For other brands I deal with the WD that supplies the bulk of my third party product. The one I have built a relationship with. Just like my customer do.
Jeff’s association idea resembles price fixing. In the United States, price fixing can be prosecuted as a criminal felony offense under section 1 of the Sherman Antitrust Act. I don’t think they will go there. Minimum advertised pricing is something that they can control which IS legal. Or how about also forcing the online discounters to do their own warranty work. That should put a wad in their shorts.
I have no “respect” for a WD that caresses me with one hand and slaps me with the other. A few months ago I stopped calling a WD who I dealt with continually for almost 10 years and started with another. My old salesman did not once pick up the phone and ask me why I had not called him. $100,000+ a year disappeared and not a word. Must have made it up in direct to the end user sales. As a customer I feel like I deserve better service than that. I know that if one of my customers stopped coming on the truck I would be asking him why.
Maybe I can make it up in online sales. Hmmm.
February 20th, 2008 at 8:41 pm
This just in…. Just checked my messages on my home phone. My old buddies from Weiss called, (haven’t spent a dime with them in 7 years) talking about all their great deals for mobiles. Maybe they have been getting some flack from this blog. Ya think? I will surely not call back.
February 21st, 2008 at 8:36 pm
“Jeff’s association idea resembles price fixing. In the United States, price fixing can be prosecuted as a criminal felony offense under section 1 of the Sherman Antitrust Act. I don’t think they will go there.”
Oil companies have been doing it for ever, I don’t see their price fixing and gouging being prosecuted. A good attorney can explain his way around anything.
I too only buy from a couple of warehouses, I only return to a warehouse what I bought from them and I verify that with a purchase date of the item, if they dispute it, I send them a copy of their invoice. Never had a problem with either one of them other than they are really slow at getting me my credit.
I pay cash when I order, if I held my payments as long as they hold my credits, do you think that would speed my credits up at all? Just asking
As for the WD’s warrantying anything and everything, wouldn’t it be easier to have a return policy of, “buy it here, return it here”? Why should every indy tool dealer driving up and down the road pay the consequence for what a handfull of dealers are abusing? This isn’t the military, punish the offenders, not the masses.